Cities have different tax rates

Some of the states with the smallest and least expensive governments are the ones with no individual income tax.

The amount of taxes that each state has to pay is very different. Because their populations are about the same, New York and Florida are good examples. In 2019, state and local governments in New York collected more than double the amount of taxes that governments in Florida collected, which was $86 billion.

A study done by the District of Columbia shows that there are big differences in tax rates. It looks at how much state and local taxes hypothetical households in each state's largest city and in D.C. pay. The study looks at taxes on sales, property, individual income, and cars. It doesn't include taxes from the government.

In the table below, you can see which cities have the highest and lowest taxes for families making $75,000 and $150,000. Here are some thoughts:

• Residents of high‐​tax cities could slash their state‐​local tax bills in half by moving to a low‐​tax city. Households earning $75,000 could save about $5,600 a year by moving. Households earning $150,000 could save about $12,000 a year by moving.
• Across the 51 cities, the largest tax at the $75,000 level is the property tax, and the largest tax at the $150,000 level is the income tax.
• The property tax was the largest tax at both income levels in Bridgeport, Newark, Detroit, and Baltimore. The study found that Bridgeport, Detroit, Indianapolis, Milwaukee, and Newark had the highest effective property tax rates among the 51 cities.
• Some cities have their own income taxes on top of state income taxes, including Baltimore, Detroit, Newark, New York City, Philadelphia, and Portland (OR).
• A number of the highest‐​tax cities are known for urban decay. Leaders in those cities should know that high property and income taxes in particular kill investment.

The U.S. states of Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming do not tax the income of individuals. The study found that cities in these states had the lowest overall tax burdens. This suggests that they don't raise other taxes enough to make up for the loss of income taxes.

The D.C. study didn't look at business taxes, but adding them doesn't make a big difference to the pattern. If you look at total state and local taxes as a percentage of income, the four states with the lowest taxes are Alaska, Florida, South Dakota, and Tennessee. These states do not have individual income taxes. New Hampshire came in at number six.

In the end, states without individual income taxes have some of the lowest taxes and smallest governments in the country. Repealing the income tax is one way for lawmakers in other states to make their governments work better.

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